Fannie and Freddie’s targets for low-income homebuyers have been rolled back
The Trump administration says it wants to serve more middle-class borrowers and is scaling back housing targets for Fannie Mae and Freddie Mac, which are intended to provide mortgages to low- and very low-income homebuyers.
The new 2026-2028 housing goals for Fannie and Freddie — which also eliminate a subgoal for supporting lending in minority communities — will exclude 177,000 working families and as many as 88,000 borrowers in minority communities over the next three years, consumer and civil rights groups say.
“The United States is in the midst of a fair and affordable housing crisis,” says a coalition of 28 national and state organizations, including the Consumer Federation of America and the National Fair Housing Alliance. wrote the federal regulator of Fannie and Freddie in November. “Yet at this critical time, FHFA is trying to make it even more difficult for working families to get a mortgage.”
Setting overly aggressive housing goals for Fannie and Freddie creates market distortions and drives up home prices, the Federal Housing Finance Agency (FHFA) said in laying out the rationale for the move in a December 23 Federal Register Notice.
The FHFA relaxes Fannie and Freddie’s targets for serving low-income homebuyers earning no more than 80 percent of the median income, from 25 percent of loans purchased to 21 percent. The target for very low-income homebuyers earning no more than 50 percent of the median income will be rolled back from 6 percent to 3.5 percent.
The new benchmarks will allow Fannie and Freddie to “focus their efforts on developing products and resources that better support first-time homeownership and increase affordability, rather than competing in a bidding war over a limited supply of targeted loans,” their regulator said.
The FHFA claims that the new goals over the next three years will likely increase access to mortgage credit for approximately 201,000 borrowers “who might not otherwise obtain mortgage financing,” the agency said.
“For too long, Biden has distorted the housing market with harmful mandates that prioritized government quotas at the expense of middle-class families,” FHFA Director Bill Pulte said in a statement press release. “Thanks to President Trump, Fannie Mae and Freddie Mac will now focus on supporting affordable homeownership for all Americans while fulfilling their statutory duties.”
But FHFA’s assertion that middle-class borrowers could be turned away or receive higher prices if Fannie and Freddie pursue overly aggressive housing goals indicates “a fundamental misunderstanding of both the goals and who they serve,” the FHFA says. Center for Responsible Lending said in commenting on the changes when they were proposed.
A “middle-class” American household is usually defined as one earning 66 to 200 percent of the median income, according to the CRL.
Under that definition, “it is clear that by pushing back on Enterprises’ affordable housing goals for single-family homes, FHFA sharply reduces Enterprises’ obligations to serve the very same middle-class communities and households that the proposal seeks to protect,” the group said. “The decision to do this couldn’t have come at a worse time.”
Lenders support objectives
Several mortgage and real estate industry trade groups generally supported the goals when they were proposed in October. The This is reported by the Mortgage Bankers Association lowering some housing target targets to “more achievable levels should have the intended benefit of reducing the risk of market disruptions.”
The Housing Policy Council, a trade association representing mortgage lenders, servicers, insurers and settlement service providers, said it was welcome FHFA’s “recognition that increased target levels may result in unintended consequences that harm borrowers, distort markets, and reduce overall housing affordability.”
But other industry groups, including the National Association of Realtors, said Fannie and Freddie’s federal regulator had not conducted a rigorous analysis to support the new targets, and questioned the FHFA’s assertion that some low-income borrowers would be better served by FHA, VA and USDA lenders or by loans financed by the private-label securities market.
“Real estate agents believe that housing targets should negatively distort and shift prices in primary markets [Fannie and Freddie’s] support from middle class home buyers to lenders or other primary market participants, [Fannie and Freddie] must check this behavior,” said the then NAR president Kevin Sears wrote Pulte in November. “Brokers applaud the FHFA for its commitment to a data-driven exploration of this issue moving forward. However, changing the targets without such data or analysis would be premature.”
The FHFA set “unrealistically low” low-income housing goals for Fannie and Freddie from 2012 to 2014, Sears insisted, resulting in “sharp FHA growth and reduced private capital participation of [private mortgage insurers]as the FHA and VA expanded. Setting the targets too low risks repeating this mistake.”
A trade association representing private mortgage insurers, American mortgage insurers, echoed that concernsaying that FHA should “serve borrowers who cannot be served by the conventional market.”
Sears also pointed out that Congress has also not directed Fannie and Freddie to support the expansion of the private-label securities (PLS) market. The funding source for subprime mortgages before the housing crisis and Great Recession of 2007-2009, the PLS channel, “has not yet been fully reformed” and currently serves borrowers with strong credit, Sears noted.
A trade association representing credit unions said they rely “heavily” on Fannie and Freddie for access to the secondary mortgage market, with a “significant portion” of loans coming from low-income and minority census tracts.
“It is critical that the FHFA ensures that credit unions and other depository institutions continue to have access to the secondary mortgage market,” the U.S. Credit Unions Advocate said. Tyler Maron wrote. “Reduced focus on these communities [Fannie and Freddie] could lead to reduced liquidity for community lenders such as credit unions and, consequently, lower homeownership rates.”
Fannie and Freddie have exceeded their target of 25 percent for low-income family home purchases by 2024, Maron said, and lowering the benchmark to 21 percent “is far too aggressive as market performance shows that the higher benchmarks are achievable and demand for affordable housing remains high.”
State housing finance agencies reminded the FHFA that Fannie and Freddie typically guarantee 20 to 30 percent of HFA program loans, which totaled $35.7 billion and financed nearly 141,000 home purchases last year.
Fannie and Freddie’s HFA loan products, HFA is preferred And HFA benefithave financed nearly 350,000 home purchases over the years, according to the National Council of State Housing Agencies.
“In explaining the rationale for the new proposed goals, FHFA suggests that this is inappropriate [Fannie and Freddie] to be leaders in mortgage lending to low-income homebuyers,” said Garth Rieman of NCSHA the agency said. “On this we respectfully disagree. Fannie Mae and Freddie Mac are publicly chartered companies with public missions.”
Objective of the Minority Census Treaty
FHFA combines minority and low-income census subgoals. Instead of making 12 percent of their sales to minority homebuyers and 4 percent in low-income census tracts, the new goal is for 16 percent of Fannie and Freddie’s loans to benefit homebuyers in both categories.
The FHFA says it wants to combine the sub-goals, which were separated in 2022, to “simplify the regulatory framework, improve operational clarity for [Fannie and Freddie]and better align the sub-goal with existing borrower-based metrics.”
The change “also promotes the [Trump administration’s] priorities for race-neutral policies and for regulatory reform by lowering compliance costs, increasing efficiency and reducing regulatory burden,” the FHFA said.
The National Urban League is “strongly opposed” to merging minority and low-income census sub-goals, saying it will “erase the ability to evaluate how effectively Fannie Mae and Freddie Mac serve communities of color – particularly Black households. While simplifying reporting may seem efficient, collapsing these measures erases the ability to track performance in historically excluded communities.”
The FHFA maintains that the public will still be able to track Fannie and Freddie’s performance in minority censuses as the mortgage giants publish that information in annual reports on their websites. The FHFA also publishes information about borrower race and ethnicity by loan product compared to the market in its annual housing report.
The new housing goals for Fannie and Freddie come as the Trump administration proposes to abolish with rules that hold lenders responsible for lending practices that have a “disparate impact” on minority borrowers, even if they are not intentionally discriminatory.
The National Fair Housing Alliance and dozens of fair housing, civil rights and say consumer organizations the Consumer Financial Protection Bureau’s proposed rule would “weaken hard-won, fair credit protections for women and limit affordable credit options for underserved communities.”
A federal district judge in June rejected the CFPB’s request to reverse a settlement it reached last year in a fair lending case involving Chicago mortgage broker Townstone Financial, which the Trump administration insisted was targeted because of its owner’s political views. CFPB Acting Director Russell Vought alleged that the disparate impact was used as a pretext to investigate the lender.
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